This week has seen a huge amount of media coverage on auto enrolment and the changes happening to workplace pensions. The changes will come into effect over the next few years with the larger employers affected immediately and then moving to smaller employers. It’s a fact that auto enrolment will affect every eligible jobholder and employer at some point over the next few years. But will it suffice?
As the saying goes ‘you can’t please all of the people all of the time’ and this is no different for auto enrolment. We need to remember that auto enrolment is simply a change in the legalities associated with workplace pensions and as such can only be driven by the level of engagement and uptake by both employers and employees.
The main difference from previous schemes is the fact that this is automatic enrolment. Every employer must automatically enrol all eligible jobholders into a ‘qualifying’ pension scheme by their prescribed date. This date (known as the staging date) is driven by the number of employees within a company’s PAYE scheme.
So, if the question is ‘Will auto enrolment suffice in raising awareness of the workplace pensions?’ The answer would be yes.
But, the main aim of auto enrolment is to increase the number of people contributing to their retirement and also to increase the amount that is being contributed (under auto enrolment some of this will come from the employers and tax reliefs). So, will auto enrolment be sufficient to do this?
In principle, and on a national level, we will undoubtedly see an increase in people contributing to pensions and the monetary level of those contributions going in the same direction. On an individual level the picture will be quite different, with the key factor in financial advice coming into play. Everyone is individual and therefore a one size fits all approach never works perfectly.
Auto enrolment already has and will continue to raise awareness of personal financial planning and specifically retirement planning. That can undoubtedly be seen as a positive outcome. The media hype around the subject will hopefully encourage, or even in some cases force, people to seek out advice which meets their individual circumstances. Financial planning isn’t about a mass market or blanket approach, but unfortunately at a government level this is all that can be done. The emphasis now sits with employers and individuals to seek out the advice they require whilst remembering that that online or published information is generic, not personal. The only place to get tailored financial advice is still and will always be from a qualified financial adviser.
We all want a better financial future and auto enrolment could be part of that picture. In financial planning we all have the tools to take control of our finances it’s just a question for a lot of people of whether they will or they won’t!
For more information about the basics of auto enrolment visit www.planningforpensions.co.uk or book a free initial consultation with one of our independent financial advisers today. Contact David Wilson on 0191 2361042.